BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          AB 429 (Dahle) - Public contracts: preferences: forest products.
          
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          |Version: June 29, 2015          |Policy Vote: N.R. & W. 5 - 0    |
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          |Urgency: No                     |Mandate: No                     |
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          |Hearing Date: August 17, 2015   |Consultant: Marie Liu           |
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          This bill meets the criteria for referral to the Suspense File. 


          Bill  
          Summary:  AB 429 would establish a bid preference for state  
          contracts for lumber and other solid wood products that are  
          harvested in compliance with the Z'berg-Nejedly Forest Practice  
          Act or verified under a Compliance Offset Protocol for U.S.  
          Forest Projects adopted by the Air Resources Board (ARB).


          Fiscal  
          Impact:  
           Onetime costs of up to $100,000 to the General Fund for the  
            Department of General Services (DGS) to promulgate regulations  
            that would establish how the bid preference in this bill would  
            interact with other existing bid preferences.
           Potential legal costs to the General Fund as a result of legal  
            actions challenging DGS's implementation, or lack of  
            implementation, of this bill.


          Background:  Existing law gives bid preferences to specific types of  







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          contractors or for projects in certain areas. Generally, various  
          Government Code sections establish the programs and DGS' State  
          Contracting Manual specifies program parameters and compliance  
          requirements.


          Proposed Law:  
            This bill would establish a bid preference in state contracts  
          for lumber and other solid wood products that are harvested in  
          compliance with the Z'berg-Nejedly Forest Practice Act or  
          verified under a Compliance Offset Protocol for U.S. Forest  
          Products adopted by the State ARB if price, fitness, and quality  
          are equal and to the extent consistent with federal law. This  
          preference would only apply to a state agency that directly  
          contracts for specified lumber and other wood products. Paper  
          and other types of secondary manufactured goods would not be  
          subject to this bid preference.
          This bill would also make a number of findings and declarations  
          regarding the importance of forested lands in California both  
          for the environment and the state's economy.




          Related  
          Legislation:  AB 2994 (Frommer) 2004 would have required state  
          agencies to give preference to the purchase of lumber and  
          certain solid wood products harvested from forests in California  
          when price, fitness, an quality are equal. AB 2994 was vetoed  
          and in the veto message of Governor Schwarzenegger stated, "The  
          preferences imposed by this bill could result in costly legal  
          challenges, retaliation by other states and nations, and bid  
          protests from those claiming the preference should be granted  
          and those objecting to it."
          AB 994 (Parra, 2007) would have established a similar bid  
          preference. AB 994 was ultimately amended into a bill dealing  
          with another topic.


          AB 199 (Holden, 2013) would have required specified state  
          agencies to purchase agricultural products produced in  
          California if certain criteria are met. AB 199 was vetoed by  
          Governor Brown.









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          Staff  
          Comments:  The author has committed to delete the provision of  
          the bill that would give a bid preference to lumber and solid  
          wood products that are harvested in a Compliance Offset Protocol  
          for US Forest Products adopted by the ARB or any other offset  
          protocol linked by the ARB. As this provision will be removed by  
          author's request should this bill move forward, this analysis  
          does not analyze any potential costs associated with that  
          provision.
          To implement this bill, DGS anticipates that it would need to  
          develop regulations to determine how this bid preference would  
          interact with existing bid preferences. For example, the  
          regulations would address how a bid from an out-of-state  
          business owned by a disabled veteran would be ranked against a  
          bid from an in-state business for lumber harvested in compliance  
          with the Forest Practice Act. DGS estimates that developing the  
          necessary regulations would likely cost no more than $100,000  
          for one year. 


          This bill would require the suppliers to self-certify that the  
          wood products are harvest in compliance with the Forest  
          Practices Act. Staff notes that compliance with the Forest  
          Practices Act may be fairly easy to verify for the purpose of  
          investigating the accuracy of the self-certification. However  
          should the bill be expanded to give preference to lumber that  
          meets other criteria, DGS may have costs associated with  
          investigating the accuracy of the self-certification either  
          because of a complaint or to ensure program integrity.


          Staff notes that this bill only creates a bid preference "to the  
          extent consistent with federal law." This provision was added in  
          recognition that such a bid preference could be challenged as  
          violating the Commerce Clause in the US Constitution which  
          establishes the exclusive federal authority to regulate commerce  
          with foreign nations and among the states. It is unclear who  
          would make the determination on whether the bid preference is  
          consistent with federal law. Staff notes that it is reasonable  
          to assume that DGS would likely face legal challenges either  
          from those who think that the bid preference is legal and those  








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          who think that it is unconstitutional, depending on whether DGS  
          implements the preference. These legal costs are unknown.




          Proposed Author  
          Amendments:  The author proposes to delete reference to the  
          Compliance Offset Protocol adopted by the ARB on page 4 lines  
          17-23. 


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